Consumers saved $1.6 billion on service charges at their banks in the first six months after new rules on overdraft fees went into effect, but those savings have since leveled off.
A new study from Market Rates Insight, a San Anselmo, Calif., market research firm, shows that after regulations requiring that banks get customer approval before enrolling them in debit overdraft programs took effect on July 1, 2010, overall service charges on deposit accounts declined by $1 billion between the second and third quarters of that year and by $600 million between the third and fourth quarters. However, there was little to no drop-off in the first quarter of this year from last year's fourth quarter.
The study also found that even as service fees declined, account balances rose. In the third quarter of last year, balances of transaction accounts increased by 0.7%, while service fees dropped by 11.8%. In the fourth quarter, account balances jumped by 9%, while fees dipped by 7.2%. Balances increased by 3.7% in the first quarter.
The analysis shows that the overdraft fee regulations, commonly known as Reg E, are "yielding the intended results," Market Rates Insight said in a press release.
